EU residents & the impact of Brexit on UK pensions
The financial services sector remains confused by the UK’s last-minute Brexit deal. EU-based advisers with UK resident clients, and UK-based advisory firms with EU resident clients must ensure they have the correct permissions to provide cross-border advisory services.
An advisory ‘passport’ is an EU cross-border agreement between member states. The passport allows regulated financial advice to be delivered from one EU country to another. An EU to UK transition period applies for passporting into the UK, allowing European firms a transition period for UK advice. However, the FCA has removed all passports for UK firms delivering services into the EU, meaning UK firms must apply for EU permissions in order to continue advisory practices.
The end of EU Passporting for UK firms
UK-based FCA regulated advisers have been unable to continue to advise their EU resident clients since 1st January 2021. Further, many UK pension providers are unable to offer even a direct service to their policyholders.
There was clear warning from European and British regulators. A ‘no-deal’ could cut all cross-border advisory services, and any deal may not be what firms hope for. However, many advisers waited for the full picture before considering major adjustments to their business plan. This has left thousands of pension members concerned upon receiving automated letters informing them of ties being automatically severed.
Despite the hope that cross-border financial services would be accounted for in the Brexit deal, on the 1st January 2021, the EU cut ties for UK FCA regulated advisory firms. Some UK firms are now scrambling to gain double regulatory accreditation while most will simply re-adjust their client portfolios.
A financial adviser is only allowed to advise clients and make policy changes on their behalf under regulatory permissions. The changes mean that many clients across Europe will be automatically ‘orphaned’. This means the risk of members left with their adviser unable to gain portfolio valuations or make planned adjustments.
The EU appears to have left each member state to consider how they treat UK advisers. France and Spain have already declared local or EU regulatory permissions will be required in order to provide financial services to their residents.
Product providers to contact those affected
Aviva recently announced they were contacting all French-resident clients holding UK pensions. This was following the French regulator, ACPR’s legislation declaring that French residents cannot make changes to their UK policies, and that UK advisers are no longer approved to service clients there.
We expect communications to be reaching the mailboxes of clients across Europe. Many EU resident clients see comfort in their UK FCA regulated adviser and have dealt with them for many years. Unfortunately, unless that adviser gains permission to advise in your country of residence, those affected will likely need to seek a local firm.
EU to EU Passporting
The EU advisory passport will continue for EU-to-EU countries. France residents, for example, can be advised by an EU-regulated Maltese-based IFA, as long as they are permitted for cross-border activities.
What to do if you could be affected
If you are a UK resident under the service of an EU firm, speak to your consultant to discuss their approach to transition. Firms had two options in order to continue to advise UK firms, but ultimately have some time to gain FCA approval.
For EU residents holding UK pension policies or under FCA advice, it is likely you will be already affected. Contact your adviser and/or pension provider, they will be able to tell you what they can and can’t do post-Brexit and how your pension could be managed going forward.
Ensure your pension provider can contact you
We understand that many international clients struggle to update their financial policy providers with their latest contact details. It is now more important than ever to ensure your pension providers are in touch.
Consider a European-based pension
QROPS declined in popularity in recent years. This was mainly due to them being so closely aligned to modern UK private pensions, leaving little ‘need’ to take funds overseas. Further, QROPS were heavily criticised for their links to unregulated advice.
QROPS will now likely see a surge in popularity, allowing pension members to manage their pension wealth locally, under professional and regulated EU-based advice. It should be noted that QROPS providers have reacted well to scrutiny, and worked hard in recent years to clean up their act, client book and ensure intermediary regulation is in place for all members.
If your adviser can’t service you
If you are happy and wish to continue your relationship with an FCA regulated UK firm, contact them first to find out the plans they have in place to continue to service you. Your firm may have a trusted partner who they can provide a ‘warm’ handover to and keep a form of cross-border relationship should you return to the UK.
Alternatively, contact us to be put in touch with an adviser with the required permissions. We work with a panel of EU regulated adviser firms with local expertise.
Consider an EU-based pension adviser
There are many advantages to ongoing planning advice, and if you hold a UK pension that can no longer be serviced by a UK adviser, you may consider switching advisory firms. Contact us to be introduced to a regulated EU adviser with cross-border passporting permissions.